L1 Capital, an investment management firm, published its ‘L1 Capital International Fund’ third quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly net return of 3.7% was recorded by the fund in the second quarter of 2021, compared to the benchmark return of 3.9% You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
L1 Capital, in its Q3 2021 investor letter, mentioned Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) and discussed its stance on the firm. Taiwan Semiconductor Manufacturing Company Limited is a Hsinchu, Taiwan-based semiconductor manufacturing company with a $610.4 billion market capitalization. TSM delivered a 7.96% return since the beginning of the year, while its 12-month returns are up by 23.00%. The stock closed at $118.12 per share on November 15, 2021.
Here is what L1 Capital has to say about Taiwan Semiconductor Manufacturing Company Limited in its Q3 2021 investor letter:
“Even though they are not majority State owned and we would expect many of China’s technology champions to continue to grow strongly, outcomes for shareholders may be unsatisfactory… The Fund has retained its investment in Taiwan Semiconductor Manufacturing Company (TSMC) which is well placed to maintain its global leadership in semiconductor manufacturing. Due to geopolitical risks, we limit the position size of TSMC in the Fund.”
Based on our calculations, Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. TSM was in 64 hedge fund portfolios at the end of the first half of 2021, compared to 76 funds in the previous quarter. Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) delivered a 5.95% return in the past 3 months.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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Disclosure: None. This article is originally published at Insider Monkey.
